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Thinking MBA? Start a business instead.

Monday, June 12, 2017

You graduated from college, spent 3 years at a consulting firm and are looking into MBA programs to take your career forward. You don’t think much about your strategy – most successful people have walked this path. An MBA program in a top school may cost you $200K and 2 years of no income but you feel that this is a necessary step that will open up many doors. Sure enough, it will introduce you to a network of well-known companies, it will increase a pool of jobs you will be able to apply for and it will even give you an opportunity to become a party star. However, it won’t necessarily do what its name implies - master business administration. Nonsense, huh? Business Schools were created for this very reason. The problem is that you simply can’t master something you don’t understand. That’s right, you don’t know what business is, you don’t understand it and yet, you are planning to “master” it. And don’t tell me you know enough about business. An analyst in a 10,000+ people company cannot possibly understand how its business operates.

I went to a business school fairly early in my career and I’ve started and have been running my own company Parceed for some time now, so I think I have a pretty good idea about what business school does and doesn’t teach you that only running a startup can. Here are 3 lessons Parceed taught me that I didn’t (or couldn’t) learn in a business school.

Ask questions. Startup life is about asking a ton of questions and business school is about answering them. When you do MBA too early in your professional life you get way more answers than you know what to do with, so you naturally tune most of the information out. Remember that case about Steve Jobs sitting on the floor in his luxury suite and conceiving an idea about a player that will change the world? With the way Harvard Business Review writes its business cases I bet you were busy visualizing yourself in that suite and agonizing about Jobs being the first to think of an iPod (when it could very well be you). I doubt you spend any time doing your own research to understand media player market, learning about the landscape, industry trends, Apple competition and how people consumed music. And even if you did it was only because HBR conveniently highlighted these topics in their storyline to keep your attention. Apple story was very far, you couldn’t relate to it and It was too vague to spark curiosity and generate questions. When you start your own business, this story magically becomes much more interesting (and not just because of Steve Jobs). What unmet need did he see that others didn’t? First MP3 players appeared as early as 1998, so how did he plan to differentiate his product that came out 3 years later? What did Apple plan to compete on? How did they come up with a pricing model and product portfolio to protect themselves from cannibalization? How did Jobs raise money for complex manufacturing and expensive design? How did the company protect its IP and fought copy cats? MBA gives you answers to these questions but you only hear them if you are genuinely interested in knowing the answers. When you own a startup answering these questions may make a difference between survival and instant death. When you are a junior consultant they are buzzwords to make an impression.

Influence without authority. It is very common for companies of all sizes to embrace matrix structure nowadays. Matrix is a team of people from different functions working on a project under the leadership of a project manager. Matrix organization often requires you to have influence without authority. This means that you should be able to convince others of your ideas without “telling them what to do” because they don’t report to you. In your previous life as a consultant you may not have even had a need to do this because you always did what your engagement manager or a partner told you to do. MBA tries to teach you by placing you on a team project where you need to collaborate with your peers, split the work and present it to a “client” (a company that works with your business school). Usually you end up procrastinating and doing most of the work in the last 3 days before the deadline when everyone gets together and does just enough work to have a decent PowerPoint deck. There is no time for tension, so the team implicitly chooses a leader who everyone listens to. When you run your business you are the CEO of a 1-3 people company. Your co-founders are working for peanuts and are free to choose whether or not they should listen to you because their livelihood is at stake just as much as yours. Then there are all these different people you need to convince that what you are doing is worth their time and money – customers, business partners, investors, advisors, etc. Without even noticing you learn how to influence without authority because a) you don’t have any real authority and a) you have to influence people to get what you want.

Manage people, operations, money. Here MBA fails miserably in my opinion. You can’t possibly teach someone how to manage people if you haven’t led a team yourself which most full-time professors have never done. You can’t show students operations hacks for a hypothetical business. And you certainly can’t help someone manage hundreds or thousands of dollars if you have always developed highly specialized budgets for billion-dollar companies. On the other hand, when you master operations, finance and effectively manage people with an English literature degree this is because your business forced you to learn when there was no one else to do it for you. At Parceed I have to be a leader, a builder and a bookkeeper and I learned by doing it, not by reading books and participating in group discussions.

There are many more reasons for starting a company before (or instead of?) doing an MBA which I can tell you about. Many lessons I learned in business school only started to make sense once I started Parceed and many I have unfortunately forgotten. So if you think you need an MBA for learning how to operate a business call me up and I will tell you – jump from warm comfort of your well-defined corporate job into an ice hole of a startup mess. You will either learn how to swim or will sink. But you don’t need a degree for either one scenario.